New report on Private Rented sector

27 March 2012

Savills and Rightmove have issued a comprehensive review of the private rented sector in Britain. Rental Britain looks in detail at the state of the sector and examines its outlook, both from the perspective of tenant and landlord. 

To view the full report click here

Key findings - the numbers:

• The total value of properties in the private rented sector is £840 billion, up 42% over the past 5 years

• Total rent bill for 4.8 million rented homes was £48 billion in 2011.  This is expected to rise to £70 billion in 2016

• The biggest challenge is supplying rising demand, forecast to rise to one in five households by 2016  requiring an additional 1.1 million homes in the sector

• £200 billion investment is required over the next 5 years and only one quarter is expected to come from buy to let lending

• Supply shortage is driving growth in asking rents – av +5.2% rises across Britain in 2011, creating affordability issues in some markets

• A step change in institutional investment in new build rental accommodation is needed to boost supply and this needs to be recognised by the planning system

• Rents vary dramatically from £48,230 pa for a 2 bed in Kensington and Chelsea to £4,560 in Blaenau Gwent

The investor benefits:

• Average gross yields vary from 5.3% in the South West to 6.3% in the North West, but there are significant variations within regions

• Gross yields average 7.8% in the top performing 10% of postcodes while the bottom 10% deliver just 4.4%

• Best total returns over 10 years forecast to come from London and the South East

• 7 London boroughs (Newham, Greenwich, Tower Hamlets, Islington, City of London, Southwark and Hackney) forecast to deliver net total annual returns >8.5% over that period

• Beyond London, Elmbridge (in Surrey), Reading, Woking and Milton Keynes are forecast to deliver net total returns >8.0%, compared to <6% in Kirklees and Bradford

• In all cases these returns can be exceeded by bulk investors

A shift to private renting may go against a nation’s emotional attachment to home ownership and long-established political aspirations of a nation of private sector home owners, but facilitating the supply of new stock into the sector is now critical, the report concludes.  Investors are urged to continue to re-examine the very real opportunities the sector offers and policy makers to ensure these opportunities are not closed down.  Rental Britain is here to stay. 

 
 

General Enquiries

Savills Margaret Street

 

Key Contacts

Lucian Cook

Lucian Cook

Director Residential Research

Savills Margaret Street

+44 (0) 20 7016 3837